Terrorism and terrorist financing is a major problem all over the world. If the financing of terror cannot be prevented, this has big negative consequences. Therefore, companies aim to protect themselves from this crime by taking precautions.
For more than a decade, financing of terrorism has become a common crime on which authorities are having hardships to prevent. It became a major political issue after the September 11 terrorist attacks in the United States of America and it weighed heavily on the minds of those involved in the financial sector since the attacks occurred. After the attacks, a variety of laws and regulations implemented to tackle terrorist financing and they are known as counter-terrorist financing policy (this may be abbreviated as CFT). Under these policies, most financial institutions are demanded to satisfy many strict demands when it comes to regard monitoring customers’ transactions and behavior, conducting proper due diligence and maintaining appropriate records of them.
Despite the high level of concern about the financing of terrorism, many people are still not sure about what it is and how it works. The basic definition of financing of terrorism is exactly as one might expect: the illegal smuggling of cash to terrorist organizations. It is ofter being linked closely with money laundering and it is common to be completed across globally. Many studies have found that there is a direct link between organized crime and financing of terrorism in the United States of America and each issue is not analyzed generally without taking the other into account.
Many transactions that are completed in order to send money to terrorist organizations are small and innocent. Financers of terrorism do not send large amounts of money at once to avoid the attention of both the governments and financial institutions. In addition, who terrorist financers also use trade-based money laundering schemes in order to get their money across borders. This is becoming more common than before and it’s a hard issue to get ahead of it. Between those tactics and online money transfer systems, financers of terrorists are able to create huge and complex networks of which the public sector is only starting to scratch the surface.
Many institutions and regulations are dedicated to fighting against financing of terrorism. As an example, one of the primary reasons for the US Patriot Act being enforced is to cut funding to terrorist organizations. Even more, FATF was created to contribute to the fight against financial offenses. One of their tactics including encouragement of other nations to strengthen their anti-money laundering regulations about states that enforce them poorly. This naming and shaming have motivated many countries to take stand against money laundering and it’s prevention.
Now, many financial institutions are being demanded to screen their clients continuously and taking as much information as possible about them and their accounts. This contributes to ensuring that their customers are not involved with financial crimes and that they are not laundering money out of the country.